Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs M/S Santom Enterprises on 23 December, 2010
THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH, WTC BUILDING, FKCCI COMPLX, K.G. ROAD, BANGALORE Date of hearing: 23.12.2010 Date of decision: 23.12.2010 Central Excise Appeal No: 1/06 (Arising out of Order-in-Appeal No 154/2005(H-III) CE dated 29.08.2005 passed by the Commissioner of Customs & Central Excise (Appeals) Hyderabad) For approval and signature Honble Mr M.V. Ravindran, Member (Judicial) Honble Mr P. Karthikeyan, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules 1982? No 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules 1982 for publication in any authoritative report or not? No 3. Whether Their Lordships wish to see the fair copy of the Order Seen 4. Whether Order is to be circulated to the Departmental authorities Yes The Commissioner of Central Excise, Hyderabad Appellant Vs M/s Santom Enterprises Respondent
Present for the Appellant : Mr V. Raja Ram, JDR Present for the Respondent : Mr R. Harish, Adv Coram: Honble Mr M.V. Ravindran, Member (Judicial) Honble Mr P. Karthikeyan, Member (Technical) ORDER No______________________DATED PER SHRI M.V. RAVINDRAN This appeal is directed against order-in-appeal No. 154/2005(H-III) CE dated 29.8.2005 wide which the learned Commissioner (Appeals) has set aside the order-in-original in challenge before him.
2. The relevant facts that arise for consideration are that M/s Santom Enterprises, 24-110/2, IDA, Uppal, Hyderabad are manufacturers of FRP/PP Storage tanks, FRP/PP lining pipes and FRP roofing sheets falling under Chapter 39. Officers of Central Excise Department visited the appellants unit and found that there was another unit by name of Santom Industrial Liners (SIL) belonging to the same proprietor Sri M.V. Francis operating in the same premises. They have used same workers and exchanged orders from one firm to another. Funds were also transferred in similar manner. They were maintaining parallel set of invoices. Their turnover exceeded Rs 30 lakhs every year from 93-94 onwards. Santom Enterprises had transferred Rs 3,00,000/- to Santom Industrial Liners on 27.11.97. Sri M. Francis in his statement interalia stated that they have supplied goods worth Rs 30 lakhs every year from 93-94 onwards as he was under impression that FRP/PP Storage tanks, FRP/PP lining pipes and FRP roofing sheets are fully exempted as they were not availing modvat facilities; that as soon as they crossed Rs 30 lakhs excluding FRP/PP Tanks during 97-98, they voluntarily registered with Central Excise Department.
2.1 It was also alleged in Show cause notice that exercise of raising separate invoices in the name of Santom Enterprises and Santom Industrial Liners appears to be a deliberate attempt to bifurcate the value of clearance in order to evade payment of duty.
2.2. Regarding classification, adjudicating authority had given a finding that as manufactured items were intended to store liquids or chemicals and were made of plastics they are classifiable under Chapter Sub-heading No 3925.10. He held that assesses argument that their products are meant for industrial use and are not builders of littlie significance. In this he relied upon the case of CCE Vs KWH Heliplastics Ltd., (1998 (97) ELT 385 (SC). Regarding value of clearances, ajdudicaitng authority held that decision in the case of Kishen Chand & Co Vs CCE (1996 (82) ELT 210) was distinguishable because M/s Kishan Chand was maintaining raw material register, RG-1 etc and the statement to Bank was not corroborative of fact whereas in the impugned case there was no evidence to disprove bank statement as the assessee had not maintained any of the statutory records. As Santom industrial Liners had no separate premises till December 97 and the work force and machinery was also used for producing goods under both the names, adjudicating authority held that clubbing of clearances of Santom Enterprises and Santom Industrial Liners was in order. Commissioner (Appeals) vide order-in-appeal No 108/2003 (H-III) CE dated 15.9.2003 held that impugned goods were classifiable under Chapter Sub-heading No 3926.90 and eligible for consequential relief. And as the dispute involved interpretation of statutory provisions, no penalty or demand for interest was held to be sustainable. Thereafter, on department appealing to Honble CESTAT, vide impugned order, the matter has been sent back for denovo consideration. In the denovo consideration, learned Commissioner (Appeals), has distinguished the ratio as laid down by the Honble Supreme court in the case of CCE Vs KWH Heliplastics (supra) and set aside the impugned order.
3. Revenues submission in the grounds of appeal is mainly on the fact that the learned Commissioner (Appeals) has not properly discussed or distinguished the case of M/s KWH Heliplastics. It is the submission that the FRP Tanks manufactured by the assessee are for storage of liquid that and these tanks are used for special purposes like storing of chemicals. It is the submission that the tariff heading does not make any difference in this regard. It is the submission that it is not proper to classify the same in general and residual entry like 29 when there is a specific entry. It is the submission that the decision of the Apex court in the case of KWH Heliplastics (supra) has very clearly settled the law in favor of the revenue.
4. Learned counsel appearing on behalf of the appellant would submit that the entire issue is time barred though he may argue on merits. It is the submission that the period involved in this case is between 1993-1994 to 1994-1995 and again from 1996-1998 and show cause notice was issued to the appellant on 11.1.1999. It is his submission that whether the items manufactured i.e. FRP/PP storage tanks etc., are classifiable under chapter Heading 3926.90 was decided by various case laws during the period few of them are sited below:
(a) CCE Bombay Vs Chemical process Equipments Pvt Ltd., (1996(88) ELT 157 (Tri-Del)
(b) 1999(112)ELT 813(Tri-Mum)
(c) Graphite Vicarb India Ltd., Vs CCE Aurangabad (1997(94) ELT 154 (T) It is the submission that the show cause notice has alleged suppression of facts or mis-declaration on the part of the appellants and he submits that this is not so, because when the decision of the Tribunal on an identical issue were in favour of the appellants there could not be any suppression or mis-declaration on his part. For this proposition, he relies upon the following decisions of the Tribunal
(a) CCE Vs ITW Signode (I) Ltd., (2005(179)ELT 120)
(b) Sparr Engineering Vs CCE Bangalore (2007 (207)ELT 522 (Tri-Bang) It is his submission that appellant entertained bonafide belief that the goods manufactured by them were classifiable under Chapter Heading No 3926.90 and the change in the legal position on account of decision of the Honble Supreme Court cannot be a ground to invoke longer period . For this proposition he would rely upon the decision of the Honble Supreme Court in the case of CCE Vs Surat Textile Mills Ltd., (2004 (167) ELT 379(SC) and Mentha & Allied Products Ltd. Vs CCE (2004 (167) ELT 494 (SC).
5. Learned DR would submit that the point of limitation was never taken by the appellant before the lower authority i.e. the learned Commissioner.
6. We have considered the submissions made at length by both sides and perused the records. On perusal of the records we find that appellant has been urging before the lower authorities that the products manufactured by them are special purpose tanks and cannot be equated with builder ware of plastics which were used in the building industries for storage of water etc. We find that the issue in this case can be settled on the question of limitation itself. It is seen from the records that the period involved is from 1993-1995 and again from 1996-1998. The show cause notice is issued to the appellant on 11.1.1999 invoking proviso to Section 11A, of Central Excise Act 1944. We find strong force in the contentions raised by the learned counsel that during the relevant period the decisions of the Tribunal in the case of CCE Bombay Vs Chemical Process Equipments Pvt. Ltd., (supra) and Graphite Vicarb India Ltd., Vs CCE Aurangabad (supra), were holding the fort which had laid down the law, that special purpose tanks used in chemical plants are classifiable under 3926.90 and are eligible for benefit of exemption under notification No 132/86. It can be said that the appellant could have entertained a bonafide belief for classifying the product under 3926.90 in view of the law which has been settled by the Tribunal. Subsequently, law has been settled by the Honble Supreme Court (in 1998), holding that the tanks which are made of plastic even though for specific purposes, could be classified under 3925.10, on the facts of the case of KWH Heliplastics.
7. Without going into any of the arguments raised on merits, we find that the decision of the Honble SC in the case of Surat Textile Mills Ltd., wherein the Honble Apex Court laid down the law as regards the invocation of extended period when there is a bonafide belief will squarely apply to the facts of the case. We may reproduce the said ratio:
22.In some cases, the CEGAT failed to appreciate that the appellants have acted honestly and under bona fide belief that the NABB were exempted from excise duty by such offence and that the appellants claim for exemption, in fact, upheld by the CEGAT itself in its appellants own case in Parle Exports (P) Ltd. v. CCE - 1987 (27) E.L.T. 349. The CEGAT in the orders impugned in these appeals have also failed to appreciate and follow the ratio of several judgments of this Court wherein it has been laid down that if the assessee acts honestly and under the bona fide belief and manufactured products are exempted from duty, the longer period of limitation is not attracted. Yet again we find that the Apex court in the case of Mentha & Allied Products Ltd (supra), as regards the invocation of extended period under Section 11A, held as under:
10.However, so far as the application of Section 11 for the purpose of levy of penalty is concerned, we must take note of the fact that different views have been expressed at different stages both by the Tribunal and the High Court of Bombay in Citric India Ltd. v. Union of India, 1993 (66) E.L.T. 566 (Bom.), and by this Court also in one of the decisions cited above, it is not clear as to whether the law is absolutely clear on the matter or not and the authorities also had to issue clarifications from time to time. In the circumstances, we think, invoking of Section 11A is not called for and levy of penalty in the present case would not be appropriate and the application of extended period of limitation is not justified. The order of the Tribunal is modified to this extent. In other respects the order of the Tribunal stands maintained. It may be seen from the above reproduced ratio of the Apex Court judgments that when an assesseee is entertaining a bonfide belief, in view of the law which has been settled at the relevant period, there cannot be any invocation of extended period.
As we have already recorded a finding that during the relevant period in this case, there were decisions of the Tribunal holding that the FRP/PP Storage Tanks etc., which are manufactured for specific purposes would get covered under Chapter 3926.90 Hence the show cause notice dated 11.1. 1999 is blatantly time barred. It was submitted by the learned DR that the question of time bar was not raised by the appellant before the lower authority. Since the issue of time bar is a question of law, which needs to be considered, we hold that the said question can be raised by the respondent before us in the proceedings.
9. In view of this, we reject the appeal filed by the revenue only on the point of time bar.
(Operative portion of the order already pronounced in the open court on conclusion of the hearing) (P. KARTHIKEYAN) Member(T) (M.V. RAVINDRAN) Member (J) /pnr/